I’m a layman, not an expert by any means but wouldn’t interest rate increasing mean spending, including buying property, decrease? Would that not mean that house prices would fall to intice more spending?
I understand currently interest rates are normal zing or falling but hasn’t this been the case for many years now since COVID lockdown?
In: Economics
Interest rates are going up to try to slow inflation. The inflation was caused by increasing the money supply through government spending.
The impact is less people borrowing for houses. But there are still people who need (or want) housing and they are still in the market. There are less people willing to sell their houses (since they don’t want to give up their low interest rate mortgage) and a shortage in the housing supply.
As a result, those who want to buy have to spend more.
Yes, it may be true that four years ago you could get a house and pay $2,000 a month for a mortgage and now that same house will cost you $2,600 a month. But guess what? People still value having that home more than they value the money so they buy the house.
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